TMFDeej (98.36)

The Stuff that Makes Stuff White

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Today I am going to write about something that I know very little about. I'm sure that at this point someone out there (hopefully not too many) are saying...how is that any different than normal :)? The thing that I am going to write about is a chemical called "titanium dioxide."

Titanium dioxide has a number of uses, but its main one is to make stuff, like paint, etc...white. It is also often used in suntan lotion to block UV rays.

I recently came across an interesting write-up on a company that is involved in the production of titanium dioxide. The company, Tronix, is a post-bankruptcy situation that I've had my eye since I saw Meryl Witmer mention it in the Barron's Round Table a while ago (Ms. Witmer is fantastic btw, possibly the best one of the bunch alongside Mario Gabelli...at least from the perspective of someone who's interested in special situations).

I picked up shares of TROX.PK in CAPS last May. Since then they have risen 11%, outperforming the S&P 500 by 8%.

This week, one of the greatest value investors of all-time, Seth Klarman, reported that he added a position in Tronox as well. Whenever he buys something I make sure to take a close look at why he may have done so and whether the company might be a good investment for my personal, or at least CAPS portfolio.

The last time I looked into this stock I think that the thing that scared me off was the whole trying to time the bottom of a market that I do not personally know a whole lot about aspect of it. People can make a great deal of money by making investments in cyclical industries at the bottom of a cycle, but they can also lose a lot of money if their timing is off.

Some aspects of Tronix are special situation-like, including the fact that it is a former spin-off (of Kerr-McGee), a post-bankruptcy play, the fact that the company should eventually re-list on a major stock exchange encouraging more people to own it and the fact that Tronix is now vertically-integrated after purchasing a miner called Exxaro Resources so it is protected from any future increases in the price of the feedstock that is used to produce titanium dioxide.

Anyhow, you can use the link above to heck out the article, it's interesting...at least to me. Is anyone out there familiar with Tronix or the titanium dioxide industry in general? If so, I'd love to hear your thoughts.

TiO2 does indeed make stuff white, and it also makes them opaque. That's why paint of every color will usually contain it. You add TiO2 to block sunlight and give the formula a white base, and then from there you add whatever colored pigments you need.

It's also used in the manufacturing of plastics, soap, shampoo, cosmetics, etc. It's all over the place.

I don't think it's really a growth industry, and these smaller companies could have trouble competing with larger suppliers (Dupont, Huntsman, etc), and Chinese companies.